Each year the US Department of the Treasury, through the Community Development Financial Institutions (CDFI) Fund, awards allocation authority to Community Development Entities (CDEs). These CDEs act as intermediary vehicles for the issuance of awards and loans to businesses located in distressed communities.
Companies contemplating a new location, expansion of a current location, and/or investment in new assets should consider the potential value available through the New Markets Tax Credit (NMTC) program. Benefits include up-front cash for real estate or operational projects.
The NMTC program offers businesses the potential to receive between 10% to 25% return on investment (ROI) in the form of cash benefits for qualified projects, with the objective of encouraging development in severely distressed areas and increasing project ROI.
While projects in all states are eligible to receive funding under the program, for this round many CDEs may focus on projects located in areas declared underserved by CDFI, including Florida, Georgia, Idaho, Kansas, Nevada, Tennessee, Texas, Virginia, West Virginia, Wyoming and Puerto Rico.
Care should be taken in navigating the competitive and complex process of securing NMTC allocations. Among many considerations, businesses must: